Poultry industry attacks new farmer contract rules, calls it an attack on rural U.S. that helped elect Trump

by Kim Souza (ksouza@talkbusiness.net) 63 views 

The poultry industry’s broad use of a “tournament system” which ranks growers on various metrics and determines the payments grow out farms are eligible to earn based on their rankings is under scrutiny by the U.S. Department of Agriculture.

The agency’s Grain Inspection, Packers and Stockyards Administration (GIPSA) announced Wednesday (Dec. 14) updated regulations aimed at protecting the rights of farmers against discriminatory practices by the chicken companies with which they contract.

The Farmer Fair Practices Rules “target the most harmful practices hurting farmers and clearly outlines common sense protections to restore fairness and reduce the burden for farmers seeking justice under the Packers and Stockyards Act,” the agency noted in its release.

The revisions relate generally to packers’ use of “unfair, unjustly discriminatory or deceptive practices” and “undue or unreasonable preferences or advantages.” Specifically, the measure, known collectively as the GIPSA rule, would deem such actions violations of federal law even if they didn’t harm competition or cause competitive injury. The USDA said in October that it would advance the new rules when the changes weren’t included in the fiscal 2016 agri funding bill.

The GIPSA rules include an interim final rule on competitive injury and two proposed rules about undue preferences which are part of the poultry industry’s ranking system also known as the “tournament system.” The USDA provides a 60-day public comment period for all three of the new rules.

Lobbyists for the chicken industry have opposed the GIPSA rules since they were first introduced in 2008. Tom Super, spokesman for the National Chicken Council, said Wednesday the new rules threaten to upend the structure of the livestock and poultry industries, raise the price of meat/poultry, and cost jobs in rural America.

“The vast majority of chicken farmers in rural America are happy and prosper raising chickens in partnership with companies, and they don’t want the government meddling on their farms and telling them how they should run their businesses,” said National Chicken Council President Mike Brown.

The industry said its business model uses a contract structure that provides thousands of farm families the opportunity to live in rural America and operate profitable businesses. The opposition says the tournament system can pit growers against neighbors and its secretive nature is contrary to the transparency farmers deserve and consumers demand.

Brown said the rules could lead to more rigid, one-size-fits all requirements on chicken growing contracts which could also stifle innovation. He also fears the interim final rule on competitive injury would open the floodgates of lawsuits from growers who try and claim financial injury when their ranking falls off and and their pay is reduced.

The NCC also claims that some of the provisions could have a detrimental impact on the welfare of the birds by eliminating competition and the incentive to provide the best care possible on the farm. Brown said the performance-based contract structure of modern poultry production was instinctively designed to put the well-being of the birds as the top priority, as incentives are given to farmers who raise the healthiest birds, take risks and work hard.  It incentivizes farmers to do their best, to compete, just like every other business in America or any other free market.

“Let’s call the recently rebranded ‘Farmer Fair Practices Rules’ what they really are – the ‘Gift to Trial Lawyers Rules’ that USDA is trying to get rammed through in the last weeks of this administration, ignoring years of congressional intent in the process,” Brown said.

Congress has blocked various attempts over the years by the USDA to address competitive injury. Strong lobbies from the pork, cattle and chicken industries continue to speak out against the GIPSA rules. This week the National Pork Producers Council called the GIPSA rules “an apparent attack on rural America for its role in helping elect Donald Trump as president.” The NPPC calls for the new Congress and repeal the “unnecessary, destructive rule.”

But not all farm interest groups are against the rules. Zippy Duvall, president of the American Farm Bureau Federation, applauded the new rules saying they are a step toward leveling the playing field in the poultry industry by ensuring all companies follow the law and treat farmers fairly, without disrupting the beef and pork markets.

“Farm Bureau has long advocated for changes in the Grain Inspection, Packers & Stockyards Administration’s rules. We have asked for changes to stop harmful business practices and protect chicken farmers. … These proposed rules will strengthen GIPSA’s ability to evaluate practices in the poultry industry and better protect individual farmers from discriminatory treatment. America’s chicken farmers have long called for greater transparency and a level playing field in our industry, and we appreciate USDA’s efforts to hold companies accountable and give farmers a voice,” Duvall said.